After experiencing its weakest first quarter in over a decade, global central banks are re-embracing gold at a record-breaking pace. The latest World Gold Council (WGC) report on global gold demand trends for the second quarter of 2026 reveals that central banks and other official institutions added a net 289 tonnes of gold to their reserves, a 62% increase year-on-year and the highest total ever recorded for any second quarter. This figure is more than five times the revised first-quarter data of 57 tonnes. Simultaneously, gold prices staged a strong rebound, supported by the Federal Reserve holding interest rates steady and a cooling US PCE inflation reading for June. COMEX gold futures for August delivery surged 1.58% on Thursday to close at $4,100.10 per ounce, marking their biggest single-day gain since July 22. Spot gold settled at $4,100.34 per ounce, staging a V-shaped reversal during the session, rallying from an intraday low of $4,028 to above $4,100.
From 57 tonnes to 289 tonnes, the most notable adjustment in the WGC's latest report is a significant downward revision to first-quarter central bank gold purchases. The industry body slashed its initial estimate of 244 tonnes to just 57 tonnes, a reduction of 187 tonnes and the lowest quarterly purchasing level in over a decade. This revision reflects a reclassification of gold previously attributed to central banks and other official institutions into the "over-the-counter and other" category. Following this adjustment, total net central bank demand for the first half of the year stands at 345 tonnes, the lowest first-half total since 2022. However, the second-quarter rebound was far stronger than anticipated. The net purchase of 289 tonnes not only quintupled the first quarter's total but also surpassed all previous second-quarter records. The WGC attributed this robust resurgence to softer gold prices and ongoing geopolitical uncertainties. In the report, WGC Senior Market Analyst Louise Street noted that while gold prices corrected from all-time highs and entered a consolidation phase, the market remains well-supported, reflecting gold's established role as a diversification tool and store of value.
Among specific buyers, the National Bank of Poland was the largest official gold purchaser globally in the second quarter, adding 51 tonnes and bringing its net purchases for the first half to 82 tonnes. The People's Bank of China followed closely, buying 33 tonnes in the second quarter and continuing its trend of accumulation. A recent WGC survey on central bank gold reserves for 2026 indicated that 45% of respondent central banks expect to increase their gold reserves over the next year. The WGC stated in its report that supported by needs for portfolio diversification and hedging against inflation and risk, central banks are still on track for another year of strong net purchases, although full-year demand is expected to fall below the total for 2025.
The rebound in gold prices was closely tied to favorable macroeconomic data. On the Federal Reserve front, the FOMC meeting on July 29 resulted in a 9-3 vote to hold the federal funds rate steady at 3.50% to 3.75% for a fifth consecutive time. Although three regional Fed presidents voted against the decision in favor of a rate hike, the decision to maintain the current rate provided some breathing room for gold. Following the announcement, gold rallied quickly, briefly breaking above $4,116 during the session. On the inflation data front, the US Commerce Department reported on July 30 that the headline PCE price index for June fell 0.1% month-on-month, its first monthly decline since 2020. The year-on-year increase narrowed to 3.7% from 4.1% in May. Core PCE rose only 0.1% month-on-month, below the market expectation of 0.2%, and its year-on-year pace slowed from 3.4% to 3.3%. TD Securities' Global Head of Commodity Strategy, Bart Melek, commented that the PCE data appeared slightly better than market expectations, suggesting a largely stable inflation environment for now. However, he cautioned that the conflict in the Middle East seems unlikely to end soon, and the disinflationary pressures that had faded in recent months could easily resurface. As a result, COMEX gold futures settled up 1.68% at $4,166 per ounce on Thursday, and spot silver rose 2.07% to $58.93 per ounce. During Asian trading on Friday, gold consolidated above the $4,100 level.
Global gold demand structure showed significant divergence in the second quarter. Total global gold demand was flat year-on-year at 1,269 tonnes, while total demand for the first half rose 2% year-on-year to 2,522 tonnes. The total value of demand reached approximately $380 billion, a new all-time high. However, the internal composition of demand displayed marked variation. Investment demand cooled, with global gold ETFs seeing net outflows of 45 tonnes in the second quarter, a primary factor behind the decline in investment demand for the period. Demand for gold bars and coins fell only 3% year-on-year but was still 21% higher in the first half compared to the same period last year. Over-the-counter trading remained active, driven by investment demand from Asia, with OTC investment reaching 327 tonnes in Q2 and 571 tonnes in the first half, showing solid performance. Jewellery demand continued to face headwinds, with high gold prices suppressing consumption. Global jewellery demand fell to 278 tonnes in the second quarter, a 17% decline year-on-year. While consumers shifted toward lighter-weight products, jewellery consumption value rose 14% year-on-year to $40 billion. On the supply side, mine production increased 2% year-on-year to 966 tonnes in Q2, but recycled gold supply fell 6% year-on-year to 326 tonnes, indicating that consumers are more inclined to hold rather than sell their gold.
Market views on the outlook for gold after it has held above $4,100 remain significantly divided. The WGC expects that, supported by demands for asset allocation diversification and inflation hedging, investment demand will continue to be the core engine for global gold demand growth this year, but the exceptionally strong demand seen in 2025 is unlikely to be repeated. Among the bullish camp, Wells Fargo reiterated its long-term price forecast, expecting gold to reach $5,300 to $5,500 by the end of 2026 and further climb to $5,800 to $6,000 by the end of 2027. State Street predicts gold will trade in a range of $4,750 to $5,500 over the next six to nine months. Morgan Stanley also holds a positive view, forecasting a gold price of $5,200 for the second half of 2026. Bernstein has raised its second-half target price to $4,375. On the bearish side, Bank of America recently warned that gold still has considerable room for a correction this year, advising investors to complete their allocations only when the price falls into the $3,250 to $3,450 range. JPMorgan is more conservative, lowering its gold price forecast for the fourth quarter of 2026 to $4,500. Jia Shuchang, Head of WGC Research for Asia Pacific, stated at the report's launch that current gold prices already reflect investor expectations for one rate hike by the Federal Reserve this year. Considering the midterm election pressures faced by the Trump administration in the second half of the year, he expects the Fed's first rate hike of the year could be delayed until December. However, if the Fed raises rates by 25 basis points in both September and December, this would create further downward pressure on gold prices.
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